Out of all of the things that don’t make sense, the tax on gold is on top of the list. It’s like taxing you on your paycheck and then doing it again when you try to save up for your future. However, that’s one of the ways in which the system works.
Why Is There A Tax On Gold?
That still doesn’t discourage precious metals hoarders from keeping buying more. That’s because they know that their investments will pay off more in the future. Compared to the paper dollar, gold serves as an example of hard money. This makes it way more reliable when you think of it as a store of value. Visit this link for more info.
More dollars can be printed, but there can’t be more gold than what’s already on the planet. Of course, top scientists can find out ways to dig up precious metals from asteroids in the solar system, but that’s still a sci-fi idea that will take a few centuries to be realized. When you compare gold to the dollar, you can see the soundness and the stock to flow ratio. This is a metric that measures the state of a medium of exchange.
Why is gold such a good asset?
One of the first things to know about gold is that it has a high stock-to-flow ratio. This means that it’s not as susceptible to inflation which could erode the buying power of the asset. Of course, in terms of the economy, there are no right and wrong options, especially when it comes to choosing a medium of exchange.
However, it’s important to take into consideration a simple fact of the free market. When individuals opt to deposit their money into dollars, which have lower hardness, then the people that produce dollars will have a higher incentive to print more. Click on this link to read more.
Here’s how that happens in real life. Wealthy individuals don’t keep their portfolios liquid. Instead, they pile assets like real estate, stocks, bonds, and precious metals. The only demographic that keeps cash under the pillow are the ones who are the most vulnerable financially.
They’re the ones at the bottom of the money chain. What happens next is that when more money gets printed, the ones who are at the bottom need to pay higher taxes and interest rates to compensate for the lost value that gets eaten away by inflation.
By every rational definition, inflation should be thought of as theft, but instead, we’re all taught that it’s a normal phenomenon. That’s not the case. It’s the fatal flaw of soft money. For that reason, you need to have a part of your portfolio into a harder form of money.
There are plenty of historical examples where monetary items have been expanded and depleted the value of people who used them. The biggest mistake happened in 1971 when Nixon decided to leave the gold standard. This gave way to the massive output of printed banknotes which eroded the savings of people every year.
Why should you keep your money as gold?
When you think of social networks, the first things that come to mind are Facebook, Instagram, and others. While these platforms serve as a social network, they can’t even compare to the biggest one, which is money.
Without a medium of exchange, society will collapse overnight. The way in which a social network operates is that the more people are joining in, the more connections can be created. There are mathematical laws that can determine the total value. When there are more links into the network, that indicates a larger range of commerce.
Since we’re such an advanced civilization, it would make sense for the entire world to globalize and have a single currency. That would make manners much easier since the world is already undergoing massive globalization thanks to social media and the internet.
However, that’s not the case, and every different country has its own currency. The free market has already made a decision that the optimal thing to use as a medium of exchange is gold. That’s a monetary product with long-term worth. In every possible scenario, that’s preferred compared to paper banknotes.
Eventually, that could become the case when hyperinflation happens. The world will have to choose a monetary item that will satisfy a couple of requirements. First of all, that would be hardness. That’s the ability to resist deprecation of its value, as well as a constantly increasing supply. The second thing is to be able to swap it indefinitely.
You can exchange a single ounce for another ounce to avoid tax and without loss of value. Next on the list is the ability to transfer it from one place to another. Of course, moving large quantities of precious metals is impossible to do on your own, but there are tools and services that can assist in it.
There are other qualities too, but they don’t matter as much as the first few. That’s because money has been a constant in human life for as long as civilizations have existed. The meaning we give to it changes, and society does as well.
The way we communicate value will evolve with the newest trends of crypto entering the market. The only thing that the future holds is the ability for assets to increase in price while the buying power of paper money diminishes. For that reason, plenty of experts suggest keeping 15 per cent of your portfolio in precious metals.